Peloton Interactive Inc. slumped in late trading Thursday after the fitness company warned that a price cut would hurt its bottom line this year and that it found a problem with the way it accounts for inventory.
The shares fell as much as 15% to $97 following
The changes help remove a barrier for consumers, Peloton said, but will take a toll on sales and profit in the coming months. The company warned that its adjusted loss would be $325 million in the current fiscal year, and its sales this quarter will miss Wall Street estimates. Peloton expects to return to profitability by fiscal 2023.
The company also pointed to a problem with its accounting. An audit of fiscal 2021, which ended June 30, found “a material weakness” in the internal controls that govern Peloton’s financial reporting. The problem stemmed from a discrepancy in the company’s year-end inventory counts.
“It did not result in a material misstatement of our financial statements or disclosures, nor will result in any restatements of historical results,” the New York-based company said. “We are committed to fully remediating these issues as soon as possible.”
There was a discrepancy between a manual count of the products in its facilities with what the system said they should be, according to President William Lynch.
There was enough of a mismatch to call it a material weakness, he said. “In some warehouses there were more — in some warehouses there were less.”
The company is spending more on technology to help fix the problem, Lynch said.
Peloton is “ensuring our scanners are scanning the products as they come into the different warehouses and field-op facilities and updating in the system on a nightly basis,” he said. “It’s essentially investing in sophisticated inventory tracking.”
Peloton, best known for its stationary bikes and online classes, has benefited from consumers exercising at home during the pandemic. But it’s also had setbacks in the past year, including supply constraints and a recall of its recently launched treadmill line. It’s facing higher costs for materials and shipping as well, and the company is spending more on marketing as it tries to broaden its appeal.
Even before Thursday’s slide, the shares were down 25% this year.
Earlier this week, Peloton announced plans to
Still, sales in the just-ended quarter were slightly stronger than analysts predicted. Revenue rose 54% to $936.9 million, compared with an average estimate of $929 million. Roughly two-thirds of sales come from its fitness product line, with subscriptions making up the rest.
Peloton posted a net loss of $313.2 million, or $1.05 a share, in the quarter, compared with net income of $89.1 million, or 27 cents, a year earlier. The company expects an adjusted loss of $285 million in the current quarter, with $800 million in revenue. Analysts had projected sales of $1 billion on average.
Connected fitness subscribers — people who subscribe to content on a Peloton machine — reached 2.33 million last quarter. Wall Street estimated 2.28 million. The company expects that number to reach 3.63 million this fiscal year.
Thursday’s price cut is the second one in less than a year. Upon launching a higher-end bike last September, the Bike+, Peloton
In addition to its bikes and treadmills, Peloton is working on new devices such as rowing machines and a wearable gadget for tracking heart rates.
